MARKET WATCH: Economic indicators raise oil prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 21 -- Crude and natural gas prices continued to climb Apr. 20 in the New York market, with other energy commodities recouping some of their previous losses following strong earnings reports from the technology sector and better-than-expected US home sales.

“The brighter outlook for the economy and an unexpected decline in crude inventories helped send crude prices up 3%, with dollar weakness providing further support. Natural gas rose more than 1% on bullish weather forecasts,” said analysts in the Houston office of Raymond James & Associates Inc. “The broader [equity] market rose 1.5% yesterday, closing at its highest level since June 2008.” Energy stocks also performed well, they said, and oil and gas prices were still climbing in early trading Apr. 21.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “Oil markets continued to take direction from the weak dollar and buoyant equity markets. Renewed confidence in the global economy has once again brought the threat of rising oil demand into focus.”

The stalemate between the rebels and Moammar Gadhafi’s forces in Libya is contributing to uncertainty over the stability of the Middle East and North Africa. “Italy, France, and the UK are sending military advisors and trainers to assist the embattled rebel forces. France has also called for intensified airstrikes on Gadhafi forces,” Ground said. Unrest in Nigeria after its recent presidential election may have contributed to supply concerns. However, Ground said, “The unrest was short-lived and concentrated in the north of the country (oil production is centered in the south).”

‘Game changer’
More important, Saudi Arabia’s recent decision to reduce its crude production is “a game changer,” warned Olivier Jakob at Petromatrix in Zug, Switzerland. “We now have a situation where global stock draws implied by [the Energy Information Agency's recent report of] world supply and demand for crude being confirmed on a micro level, and if the flat price of oil is already at elevated levels, those stock draws could translate in a tightening of the time structure. A tightening of the crude time spreads in West Texas Intermediate should also result in a reduction of the Brent premium to WTI.”

Saudi Arabia’s production cut “implies a stock draw…of 1 million b/d in the second quarter,” Jakob said. “For April to date, the US has been reducing its stock layers at a rhythm of 800,000 b/d.”

In April of 2009 and 2010, he said, “The US was building stocks. This means that stocks are starting to trend into a deficit to the levels of the last 2 years and are trending towards the 2007 levels. In early February, US total petroleum stocks were 30 million bbl above the 2010 levels; they are now 29 million bbl below.”

Jakob pointed out, “It is not that demand is very strong but that supplies are very low. US refineries have been running at low operating rates, and this has reduced the stock levels of refined products. The product balances should improve once the refineries return from their scheduled and unscheduled maintenance. But given that crude oil stocks have not risen and that the Organization of Petroleum Exporting Countries is cutting production, the layers of crude oil stocks should diminish once they improve on products.”

In other news, BP PLC commemorated the first anniversary of the Macondo blowout in the Gulf of Mexico by suing all of the other primary producing and servicing companies connected with that well. Apr. 20 also was the deadline for parties associated with that blowout and spill to file claims against each other.

BP filed suit for $42 billion—the estimated cost of the resulting spill—against Transocean Ltd., whose Deepwater Horizon semisubmersible rig sank in that disaster; and Halliburton Co. that was involved in cementing the well at the time of the blowout. That’s despite usual provisions in service company contracts that indemnify service firms from such losses. BP also sued Cameron International Corp., manufacturer of the blowout preventer blamed for the disaster, as well as Mitsui & Co. and Anadarko Petroleum Corp., BP’s two partners in the well.

“Cameron, Anadarko, Halliburton, and Mitsui have also filed claims to protect their interests,” said Raymond James analysts. “Buckle up for a long and tenuous legal process.”

US inventories
The Energy Information Administration reported Apr. 21, the injection of 47 bcf of natural gas into US underground storage in the week ended Apr. 15. That was below the Wall Street consensus for 52 bcf input but raised working gas in storage above 1.65 tcf. Those stocks are 165 bcf less than a year-ago in the same period but 23 bcf above the 5-year average.

EIA earlier said commercial benchmark US crude inventories fell 2.3 million bbl to 357 million bbl in the week ended Apr. 15. That was counter to a Wall Street consensus for a 1.3 million bbl increase. Gasoline stocks dropped 1.6 million bbl to 208.1 million bbl, slightly less than the market consensus for a 1.8 million bbl decline. Both finished gasoline and blending components were down. Distillate fuel inventories decreased 2.5 million bbl to 148.3 million bbl in the same period while analysts were expecting a small increase of 200,000 bbl (OGJ Online, Apr. 20, 2011).

Energy prices
The new front-month June contract for benchmark US sweet, light crudes climbed by $3.17 to $111.45/bbl Apr. 20 on the New York Mercantile Exchange. The July contract gained $3.18 to $111.91/bbl. On the US spot market, WTI at Cushing, Okla., increased $2.74 to $110.89/bbl as it tried to align with the new near contract.

Heating oil for May delivery popped up 6.29¢ to $3.22/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 4.42¢ to $3.28/gal.

The May contract for natural gas was up 4.8¢ to $4.31/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 12.5¢ to $4.34/MMbtu.

In London, the June IPE contract for North Sea Brent advanced $2.52 to $123.85/bbl. Gas oil for May jumped by $20.25 to $1,020.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes increased $1.97 to $117.97/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Market watchers' adjustments offer hints of recovery

01/26/2015 Because markets look ahead, changes in standard forecasts offer potentially important signals during storms such as the one now pummeling the oil a...

A message from Oil & Gas Journal

12/15/2014

An important transition occurred during production of this issue of Unconventional Oil & Gas Report.

MARKET WATCH: Crude oil prices down as US government shutdown lingers

10/16/2013 The front month crude oil contract on the New York market dropped to the lowest level on Oct. 15 since it last settled below $100/bbl on July 2.

MARKET WATCH: Crude oil traded higher amid Washington budget talks

10/15/2013 Crude oil futures prices traded higher on the New York market Oct. 14 as US lawmakers reported progress in ongoing efforts toward reaching an agree...

MARKET WATCH: Oil prices close down at end of volatile week

10/14/2013 The NYMEX November crude contract lost 99¢ on Oct. 11, settling at $102.02/bbl ending a week of volatile trading. The December contract fell 83¢ to...

MARKET WATCH: Oil prices continue falling as Syria risk apparently lessens

09/17/2013 Oil futures prices reached their lowest level in 3 weeks with the Sept. 16 closing while the US and Russia agreed to terms under which Syria is exp...

MARKET WATCH: Oil prices rebound slightly awaiting US decision on Syria

09/04/2013 Oil prices climbed on New York and London markets Sept. 3 in response to comments indicating key US lawmakers will support US President Barack Obam...

MARKET WATCH: Syria crisis puts pressure on some oil markets

08/27/2013 Crude oil prices in world markets edged upwards Aug. 26 on reports that “tolerance of the West for what’s taking place in Syria appears to be comin...

MARKET WATCH: Oil futures rise Aug. 23 on Lebanon violence

08/26/2013 Oil futures prices rose on the New York market Aug. 23, and traders attributed the increase to escalating violence in the Middle East that added to...
White Papers

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected